I think Microsoft's strategy here is surprisingly well thought out. Their execs finally figured out "to know your enemy you must become your enemy". Windows 10 is free, has a new state of the art graphics API (DirectX v12) created by the best graphics specialists, real software engineers, and real testers in the business, awesome developer tools (Visual Studio) that actually work with real CPU/GPU debugging and profiling support all built in, all of your existing apps and games still work, and they're pulling out all the stops with the Halo/Xbox branding right down into the OS and browser.

They just need to make the Windows 10 App Store not suck: Continue to use their Xbox brand as a lever, carefully feed and nourish the ecosystem, listen to their customers, and undercut the living hell out of Steam. Steam itself started out as a total pile of crap, but they listened to their customers, fixed the problems over time, gave their customers good deals and shipped apps you couldn't get anywhere else at the right prices, and built and nourished the community. Microsoft can do all the same things, and perhaps they've finally figured this out.

It's now all down to execution, recovering from some obviously bone headed moves (sometimes fueled by excessive Redmond Kool-Aid drinking, like the botched Windows 8 UI and no Start Menu disasters), recognizing and quickly recovering from the inevitable new bone headed moves, and sustaining the effort over the long term (something Microsoft has definitely not been very good at except for their core brands). Competition is great.

About Me

Back in the day I worked for several years at Digital Illusions on things like the first shipping deferred shaded game ("Shrek" - 2001), software renderers, and game AI. Then, after working for Microsoft at Ensemble Studios for 5 years as engine lead on Halo Wars, I took a year off to create "crunch", an advanced DXTc texture compression library. I then worked 5 years at Valve, where I contributed to Portal 2, Dota 2, CS:GO, and the Linux versions of Valve's Source1 games. I was one of the original developers on the Steam Linux team, where I worked with a (somewhat enigmatic) multi-billionare on proving that OpenGL could still hold its own vs. Direct3D. I also started the vogl (Valve's OpenGL debugger) project from scratch, which I worked on for over a year. In my spare time I work on various open source lossless and texture compression projects: crunch, LZHAM, miniz, jpeg-compressor, and picojpeg.